A landmark study in the Harvard Business Review found that increasing customer retention by 5% can lead to a whopping 25%-95% increase in revenue, and these numbers have since become the guiding light of customer success organizations.

But what exactly is customer retention, and how do you increase it by 5%?

Customer retention is the strategy of getting more of your customers to stay loyal to your brand or business. And a successful customer retention strategy turns one-time shoppers into loyal, repeat purchasers that spend more, purchase more frequently, and refer friends more often than other customers.

A customer retention strategy will boost your profitability while encouraging repeat business that drives a sustainable long-term business model. Below are five tools and strategies you can use to retain customers and to keep them coming back.

5 Customer Retention Tools to Grow Your Business

1) Customer Loyalty Programs

A customer loyalty program is an easy way to boost customer retention. When a customer is given additional value -- by way of a points system or a VIP rewards program, for example -- for buying from you, it becomes much more difficult to choose a competitor for their next purchase.

What's more, loyalty programs allow you to reward more than just loyalty. You can reward customers for fulfilling other profitable actions like writing reviews, sending referrals to friends, and social sharing. These are just a few of many ways you can activate your customers and reward them for helping you grow your business.

Case Study: Starbucks

Starbucks offers one of the most popular loyalty programs around. On its surface, it's a simple points-based system where Starbucks drinkers earn stars for spending money at the coffee shops, receive free drinks on their birthdays, and can order ahead using the mobile app. 

But the programs also rewards shoppers who engage with the mobile app more and more frequently -- offering personalized offers and challenges to earn more stars, which eventually can get the user a nice, shiny gold card -- a personalized rewards card that awards the holder with free drink refills and food offers. It's something of a running joke how pricey Starbucks drinks are, so this is an excellent reward for customer loyalty.

(Read more about these customer loyalty programs that actually add value for customers.)

2) Gamification

The application of game mechanics is not just for mobile apps and video games anymore. You can get the power of gamification working for your customer experience and purchase process. With gamification, you can encourage users and customers to complete actions by making it more enjoyable and adding a sense of competition.

Sites that incorporate gamification often have leaderboards, statuses, and badges so shoppers can showcase where they stand relative to others. This customer retention tool is also effective because it can be incorporated into other things -- like promotions and even loyalty programs.

Case Study: Autodesk

Autodesk offers a 30-day free trial of its high-tech 3-D animation and rendering software, and the company found that trial users were more likely to buy the full package if they used the free trial at least three times. To get people online and testing it out, Autodesk gamified its tutorials to reward frequent users with badges and high rankings on a leaderboard.

This experiment increased the free trial conversion rate by 15% -- and drove a stunning revenue increase of 29%.


Source: Autodesk

3) Personalization

Personalization allows you to increase customer retention through more relevant and tailored experiences with the brand. Personalization requires you to collect data about your customers that you can later use to make recommendations and tailor promotions to each customers individual needs.

A simple way to use personalization to increase customer retention is through email. When a lead or customer is addressed by name with content they care about, they will be much more loyal to you and your brand. And if that personalized email offers a reward or benefit for your customer, so much the better.

Case Study: AT&T Thanks

AT&T offers customers presale access to event and concert tickets if they pay for a certain cellular data plan. By starting the email subject line with my name, and offering me early access to buy tickets to see a band I like (come on -- we all love Blues Traveler, don't we?), I'm more interested in this targeted offer than I might otherwise be.


4) CRM

CRM is a tool used to increase satisfaction by keeping track of a customer's entire journey. A CRM tool is used in tandem with other tools on this list to provide a total customer retention strategy. You can use your CRM to track which customers have received which badges with your gamification tactics -- or which customers have earned points in your loyalty program, for example

A CRM has many operational benefits, but it also can help with customer retention. When all customer information and interactions are stored in one place, it becomes much easier to provide a cohesive and positive customer experience.

Case Study: Ceros

HubSpot offers a free CRM to manage customer relationships, track their purchases and actions, and help marketers, salespeople, and customer support reps best help people get the information and assistance they need.

Ceros, the cloud-based interactive content platform, used the HubSpot CRM to help sales reps unify company data to provide a ton of context when reaching out to new leads. The simplified UX created greater transparency between sales and marketing teams, and the CRM helped Ceros better focus on its target audiences and markets to reach out to the right leads, at the right time, to turn them into successful customers.


Source: HubSpot

5) Customer Support

Support systems are any tools added to your site to improve customer service and satisfaction. These systems could be help desk software or live chat software, for example. All of these support systems allow you to resolve customer issues and conflicts quickly and efficiently, which provide a few key benefits.

The first benefit of support systems? They provide a one-on-one experience. You can easily address customer issues and quickly get things resolved -- which can create a lifelong customer. Second, live chat software allows you to engage with customers in real-time. Customers don’t want to wait, and live chat is a direct and real-time connection to your customer to give them the help they need, the way they want to get help.

Customer Retention Is the Key to Growth

Customer retention is the future of business growth. It's not enough to attract leads with compelling content or to close new customers with a great deal. Now, to stand out against in increasingly competitive verticals, businesses need to retain customers by helping them be so successful that they refer their friends and become brand evangelists.

These are just a few ways to keep your customers happy and coming back to purchase more or upgrade -- and, eventually, refer their friends. Let me know on Twitter if there are other customer retention tools we should write about here on the HubSpot Service Blog.

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Originally published Oct 24, 2017 8:00:00 AM, updated October 30 2019


Customer Retention